The Leung Chun-ying administration's pronounced strategy of taking a more proactive role on economic development gained widespread endorsement on Wednesday, paving the way for long overdue economic diversification.

The Economic Development Commission, the Chief Executive's top advisory body on economic matters, which is comprised of more than 20 experts from different sectors and professions, suggested at its first meeting that the government should proactively promote economic development by taking the initiative, including direct investment in specific industries or projects.

Positive non-interventionism may have served the city's economy well in the past as evidenced by strong economic growth over the past few decades. But the laissez faire doctrine has also brought some major problems to the local economy including a narrow economic base, which in turn has led to deep-rooted social problems, such as poverty and housing, causing concerns for the sustainability of economic development.

Because of this old-fashioned doctrine, the government has traditionally refrained from subsidizing or pump-priming any specific industry. Without government support, private investment has tilted toward more profitable or more promising sectors such as real estate.

As a result, the city's economy has been left in a state that is too lopsided, relying too much on a few sectors, particularly real estate and finance. The booming real estate and financial sectors have hidden the reality in other declining sectors, accentuating a vicious cycle.

The Chief Executive's move to help develop other industries and diversify the economy is the right step for tackling the city's deep-seated social problems. A diversified economy and thriving industries will help improve the city's job-market structure, providing better employment opportunities and upward mobility to workers while giving rise to a stronger middle class.

Government's direct investment in certain industries or projects is necessary, especially when they are still in nascent stages and fail to attract sufficient private investment, or when they are critical to the development of other industries.

Government interventions are also necessary when the market fails. After all, positive non-interventionism was never meant to be a panacea for all economic problems.

The author is a current affairs commentator.

(HK Edition 03/14/2013 page1)